Most small business owners think that insurance is too expensive or that they can just go without it. However, did you know that four out of ten business will experience a property or liability loss in the next ten years? At the top of the list for most common is burglary and theft but thanks to the internet age the most costly for small business owners is a reputational harm that includes a violation of privacy, libel, and slander coming in at a whopping $50k. Most small businesses would not be able to survive such a claim, and some may not have the funds or resources to keep the doors open after some of these other costly scenarios either.
Most Costly Claims and How Often They Occur
- Reputational Harm ($50,000) Less than 5% of all claims filed
- Vehicle Accident ($45,000) Less than 5% of all claims filed
- Fire ($35,000) 10% of all claims filed
- Product Liability ($35,000) Less than 5% of all claims filed
- Customer Injury or Damage ($30,000) Less than 5% of all claims filed
- Wind and Hail Damage ($26,000) 15% of all claims filed
- Customer Slip and Fall ($20,000) 10% of all claims filed
- Struck by an Object ($10,000) Less than 5% of all claims filed
- Water and Freezing Damage ($17,000) 15% of all claims filed
- Burglary and Theft ($8,000) 20% of all claims filed
It’s important to note that these numbers only represent those that have insurance and have turned in the claims. These scenarios play out every day for those that don’t have insurance as well.
Business Insurance Could Save Your Business from Bankruptcy
No, there is not a “bankruptcy” insurance policy, but having the proper commercial insurance in place could pay for things like lawsuits or theft or other incidents that often lead to bankruptcy. In 2016 alone, approximately 38,000 businesses declared bankruptcy in the US. Now, let’s put that into perspective.
If you run a small mom and pop shop selling let’s say baked goods, a customer slipped and broke their arm in your store, could you afford the $20,000 that it typically costs for that type of injury? What would pulling that sum of money out of your reserves (if you have them) do to your daily operations? The trickle-down effect of a loss like that could cause big problems. Now, compare that to the minimal cost of taking out a business owners policy or other commercial package policy. You are not only buying protection for your business; you are buying peace of mind for yourself that when the unexpected happens, you will be prepared.
How to Protect Your Business Against Claims
Okay so you have the proper insurance coverage in place, what else can you do protect against the unknown.
Produce a product? Protect yourself against product liability claims by testing your product thoroughly, add warnings to dangerous goods, make sure you are comfortable with your supplier’s operations. Carry product liability insurance.
Customers onsite? Inspect and maintain your parking lots and sidewalks regularly. Put signage around slippery surfaces. Make sure you check all lighting inside and out for dark spots and keep them well lit. Make sure there is no lifting of carpets that could cause slip and fall injuries. Always inspect smoke detectors, and all exits are clearly marked. Carry a general liability policy.
Have employees? Create a code of conduct and enforce it. Make sure there are a check and balance in place for all money handling. Have a clear policy and procedures in place. For example, someone who reconciles the credit card, should not be the same person who enters the transactions. Pay attention to employee behaviors; if an employee with access to the company finances or operations is always working when nobody else is or never takes a vacation, they could be up to no good. Add employee theft and dishonesty coverage to your insurance policy.
Own computers? Cybercrime is expensive and can cost companies thousands of dollars. Be sure you have the proper procedures in place, encrypt data, do a yearly vulnerability test, train employees, use multifactor authentication and make sure you carry cybersecurity insurance.
Read on for more information about Commercial General Business Liability.